Private Sector Development in Post-Conflict Liberia
The Liberia Private Sector Development in Post-Conflict program is a multi-year initiative aimed at the twin objectives of supporting the government of Liberia in regulatory reform and attracting and promoting quality investment. Initiated in October 2006, the program is currently in the final stages of Phase 2. During Phase 1 (February 2006 - July 2007), the World Bank Group Investment Climate team provided the government with diagnostic and analytical support to: ·
Identify administrative barriers to business formalization (the majority of Liberian businesses are in the informal sector);
Complete a technical review and support the government's legal redrafting of the national investment code to align it with best practice;
Assess the institutional needs of the National Investment Commission, Liberia's investment promotion agency, to enhance its ability to promote Liberia's investment opportunities;
Launch a public-private dialogue (through the Liberian Better Business Forum or LBBF) to underpin the reform strategy by enabling the government and the private sector to jointly identify and prioritize business reforms to stimulate rapid growth and investment.
Phase 2 of the program builds upon the foundational diagnostic and analytical support of Phase 1. It was developed to support the government in designing and implementing a range of business reforms to enhance the regulatory and administrative environment and promote investment generation. This has been achieved by eliminating administrative and regulatory barriers that inhibit growth and by enhancing the government's capacity to attract quality investment through strengthening investment intermediaries and promoting investment in Liberia's leading industries. The program also includes a comprehensive communications and advocacy strategy aimed at improving the overall business climate and enhancing the effectiveness of the LBBF and larger investment climate program.
Program Highlights – December 2009-June 2010
During the reporting period, the government of Liberia successfully passed a new investment code. The passage of the code was supported by over three years of technical assistance from the team and two years of advocacy support from the Liberia Better Business Forum (LBBF). Among other things, the new code provides for transparency with respect to the awarding of investment incentives and protection of investors against expropriation. It additionally allows for repatriation of profits, protection of intellectual property rights, and provides investors with access to international dispute resolution mechanisms. An earlier version of the law sought to eliminate protection of certain business sectors which had been exclusively reserved for the indigenous population. Following the President's withdrawal of this early draft from the Legislature, the private sector, with support from the LBBF, reached a compromise which resulted in a reduction of the number of reserved sectors --the balance now being opened to international investment. With the assistance of the team, the government's Business Reform Committee was able to implement 8 additional investment climate improvements in the first half of 2010. These improvements helped to further ease trade and streamline property registration. The 8 new improvements, coupled with 18 implemented in 2009 and 21 implemented in 2008, bring the total to 47 improvements implemented in three years. As may be recalled, last year, as a result of its continued efforts to improve the investment climate, Liberia was recognized by the World Bank Group as a Top Ten Global Reformer in the 2010 Doing Business Survey.
Progress to Date – June 2010
Phase 2 of the Program is organized into five work streams (objectives), all of which are complimentary and interrelated.
Objective 1: Reducing informality by easing the process of business registration for new businesses
The aim is to streamline business start-up regulations and procedures. In 2007, the team provided assistance to the government in securing a $2.5 million grant from the Investment Climate Facility for Africa (ICF) to support the design and implementation of a modern business registry, initially to be located in Monrovia, with two eventual satellite locations. Following a detailed procurement process, Norway Registers Development AS or "NRD" was selected as the principal service provider for design of the business registry. NRD has now completed design of the registry, which has been agreed in principle by all of the relevant governmental agencies, including the Ministries of Commerce & Industry, Foreign Affairs and Finance. Significant elements of the design include: a) agreement to establish a centralized registry as a semi-autonomous agency under the supervision of the Ministry of Commerce; b) agreement to staff the registry with personnel seconded from relevant agencies involved in business formalization (i.e., Commerce, Foreign Affairs and Finance); and c) significantly, completion of inter-ministerial regulations to govern operation of the registry.
The team supported the government in finalizing procurement of the facility that will house the registry. The site, which will be branded "Enterprise Square", is centrally located in Monrovia. Although the building was initially occupied by squatters, it has now been vacated and the contractor retained by the government is due to complete refurbishment in August. In addition, the team has retained a consultant that has begun revision of the Associations Law based upon feedback that was received from the private sector and government. Given competing priorities of the government, the drafting of revision has been delayed and is now expected to be completed next year. Thereafter, further stakeholder feedback will be sought before final submission of the draft to the legislature.
Finally, the team continued to provide technical assistance to the government's Joint Steering Committee to assist it in completing procurement of the necessary hardware and furnishings that will be required to launch the registry. It was earlier envisioned that the registry would be launched by the first quarter 2010. However, members of the Joint Steering Committee have not always been able to dedicate as much time to the initiative as had been hoped, and delays have resulted from late approval of the registry design and difficulties in procuring the registry building free and clear of occupants. As a consequence of the delays, the launch date of the registry is now set for the end of the year.
Objective 2: Assisting the government in promoting investment
The aim of this component is to provide support to the Ministry of Agriculture to assist it in revitalizing the tree crop sector. Given Liberia's history, climate and natural resources, agribusiness (and in particular, the tree crop sector) is one of the sectors that has the greatest potential to contribute to the revitalization of Liberia's economy. Through attraction of quality investment (large plantations), potential exists to create thousands of direct jobs that could additionally support livelihood for thousands of small producers and outgrowers.
Building upon the team's earlier technical support on a model concessions framework, the government requested, and the team has been providing, support on the development of a framework for a small holder/outgrower strategy. During the reporting period, the consulting firm hired by the team completed an assessment of good international practices and conducted several stakeholder outreach missions to inform the design of the framework. The firm has now completed a first cut of the framework which the team anticipates presenting to the government before year's end.
Objective 3: Supporting the business climate reform efforts of the LBBF and the Liberia Business Reform Committee
The aim of this work stream is to provide technical support to the Business Reform Committee and the LBBF. It has two components.
The first is technical support to establish an effective public private dialogue to underpin the reform agenda. Officially launched in July 2007, the LBBF is widely recognized for its role in advocating and supporting investment climate improvements.
LBBF has continued its advocacy support for the passage of the revised investment code, including providing communications support through the radio and newspapers -- publishing the bill and supporting radio programs intended to discuss the merits of the bill.
In support of the Doing Business reforms, the LBBF additionally provided support to ensure private sector participation in and advocacy for the completed reforms. Using its bi-weekly news column, the LBBF published the reforms to broaden private sector communication of the reforms. It additionally continued to sponsor a weekly radio program promoting investment climate improvements.
One of the key focal areas of the LBBF during this reporting period was continued assistance to the government in the development of a commercial code and commercial court. This project stems from recommendations made during meetings of the legal and regulatory working group of the forum. In this regard, the LBBF, in partnership with World Bank and IFC Advisory colleagues, sponsored a study tour for principal Liberian stakeholders to visit the Ghanaian commercial court. The Liberia stakeholders returned with a sense of urgency and purpose and have been working aggressively during this reporting period to complete sections of the law. The team is racing to complete and submit the code to the Legislature before the Legislature recesses in September for its agricultural break.
The objective of the project is to ensure greater security for commercial transactions, substantially improve access to finance, significantly improve the investment climate and inspire greater confidence in Liberia as an investment destination. The full project is expected to include drafting of the code, establishment of a court (mild refurbishment and outfitting of a courtroom to be designated by the Chief Justice), the study tour to Ghana and training of at least three commercial law judges. It is anticipated that the courtroom will be launched by June 2011.
Last December, the team completed an internal assessment of LBBF to identify potential means of improving its effectiveness. The assessment revealed many strengths of the forum, including the role it has played in reform advocacy and its brand recognition. Opportunities to strengthen its structure and formal communications mechanisms were also identified. During the reporting period, the team met with stakeholders, discussed the recommendations and agreed on the need to restructure the forum. The restructure, which will take place over the coming months, will include increased emphasis on research-based analysis and issue identification, as well as better defined roles for the Secretariat and Governing Board.
The LBBF, through its advocacy platforms facilitated the dissemination of completed investment climate reforms to ensure private sector awareness of the improvements. Through its sponsorship of the commercial court study tour to Accra, it exposed the Liberian stakeholders to good international practices to enable the team to better understand the purposes and function of a commercial court. This exposure has paid dividends in fostering an informed team committed to completing the draft code with a sense of urgency. Inclusion of members of the legislature among the study tour participants has also helped to build the constituency in the legislature that will be required to eventually pass the law.
The second component of this work stream is technical support of the Business Reform Committee (BRC), a cabinet level committee formed in direct response to Liberia's inclusion in the World Bank Group's 2008 Doing Business Report. The BRC's mandate is to work with the LBBF to identify and drive reforms to improve Liberia's investment climate and its scores as reported on the survey.
With the team's support, the BRC implemented 8 investment climate improvements in the first half of 2010. The improvements focused on two of the Doing Business indicators, including registering property and trading across borders (see below). To ease property registration, the government adopted a uniform transfer deed that eliminates the need to retain an attorney to complete the property transfer.
Objective 4: Improving trade logistics
This component is aimed at improving the trade logistics environment, including reducing the time and costs of import and export transactions which are necessary components of Liberia's integration into global markets.
The first phase of this component focused on the immediate short-term improvements contributing in part to the Doing Business trading across borders indicator through improving the time, reducing costs and laying the groundwork for more systemic reform. With support from the trade logistics project team, the Business Reform Committee achieved 22 reforms between 2008 and 30 June, 2010. The team additionally provided technical assistance to the government in establishing a one stop shop for customs clearance that was officially launched in May, 2009. By reducing unnecessary steps, paperwork and costs, the improvements helped to speed imports in Liberia and resulted in a 5 place improvement in Liberia's Doing Business ranking for Trading Across Borders in 2010.
The team has provided ongoing assistance to the government to support the roll out of ASYCUDA (a customs clearance software package), specifically in providing technical assistance to define risk profiles and design policies and procedures for the implementation of a risk-based inspections regime. Additionally, during the reporting period, the team began the process of supporting the government to draft an updated Customs Code consistent with international best practice. Finally, the team assisted the government in implementing 7 additional investment climate improvements to ease trade.
Over the coming months, the team will continue to provide support to the government on improving the risk-based inspections regime, including broadening its application to the outlying border posts. This work will be done in close collaboration with other development partners supporting the expansion of the ASYCUDA rollout.
Objective 5: Supporting the government's development of a Special Economic Zone strategy and pre-feasibility study to facilitate development of new industrial space and reform pilots to energize private sector investment
The team has been providing ongoing assistance to the government in the development of a strategy for the establishment of a Special Economic Zone (SEZ). Responding to interest from a potential international investor, the government requested technical support in designing a regulatory and institutional framework for a zone scheme and authority. As part of the assistance to the government, the team delivered several presentations to key government officials and private sector stakeholders on best practices and completed a pre-feasibility study on market demand, land accessibility and the legal and regulatory environment.
Following the team's delivery of a technical brief and recommendation to the President, a decision was made to refocus the SEZ program from a site specific initiative to a national regime. This decision resulted in a shifting away of focus from Buchanan, Liberia's second largest port. It was significant in that the government's initial drive for development of a zone was precipitated by an expression of interest from a group of international investors who wanted to secure access to the port, but were reluctant to otherwise disclose the nature of the planned investments. By moving the focus away from the perhaps speculative investment, the government avoided entering into a contract where the economic and social returns to the country were not clear. With a new national focus, the government took the decision to slow the project to ensure a comprehensive approach rather than to speed through passage of legislation to suit the interests of a speculative investor. In line with the decision, the President dissolved the former SEZ steering committee which had been largely comprised of Buchanan representatives, and instead, requested that the initiative be managed under the National Investment Commission (NIC) as part of the government's overall investment promotion strategy.